Sherman Antitrust Act
The Sherman Antitrust Act (Sherman Act, as it was formally designated by the Hart-Scott-Rodino Antitrust Improvements Act in 1976. July 2, 1890, ch. 647, , ) requires the United States Federal government to investigate and pursue trusts, companies and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by the United States federal government. History The Sherman Act was passed in 1890 and was named after its author, Senator John Sherman, an Ohio Republican,the chairman of the Senate Finance Committee. http://www.ourdocuments.gov/doc.php?flash=true&doc=51 .The Sherman Act followed Ohio's Valentine Anti-Trust Act (1898)."Valentine Anti-Trust Act" Ohio History Central. Retrieved 6/5/09. After passing in the Senate on April 8, 1890 by a vote of 51-1, the Sherman Act passed unanimously (242-0) in the House of Representatives on June 20, 1890, and was then signed into law by President Benjamin Harrison on July 2, 1890. Purpose Despite its name, the Act has fairly little to do with "trusts". Around the world, what U.S. lawmakers and attorneys call "Antitrust" is more commonly known as "competition law." The purpose of the act was to oppose the combination of entities that could potentially harm competition, such as monopolies or cartels. Its reference to trusts today is anachronism. At the time of its passage, the trust was synonymous with monopolistic practice, because the trust was a popular way for monopolists to hold their businesses, and a way for cartel participants to create enforceable agreements. William L. Letwin, Congress and the Sherman Antitrust Law: 1887-1890, 23 U.Chi.L.Rev 221 (1956). In 1879, C. T. Dodd, an attorney for the Standard Oil Company of Ohio, had devised a new type of trust agreement to overcome Ohio state prohibitions against corporations owning stock in other corporations. A trust is a centuries old form of a contract whereby one party entrusts their property to a second party. The property is then used to benefit the first party. The law attempts to prevent the artificial raising of prices by restriction of trade or supply.http://www.butnowyouknow.com/sherman.anti-trust.act.html In other words, innocent monopoly, or monopoly achieved solely by merit, is perfectly legal, but acts by a monopolist to artificially preserve his status, or nefarious dealings to create a monopoly, are not. Put another way, it has sometimes been said that the purpose of the Sherman Act is not to protect competitors, but rather to protect competition and the competitive landscape. As explained by the U.S. Supreme Court in Spectrum Sports, Inc. v. McQuillan: ::"The purpose of the Sherman Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself." This focus of U.S. competition law, on protection of competition rather than competitors, is not necessarily the only possible focus or purpose of competition law. For example, it has also been said that competition law in the European Community (EC) tends to protect the competitors in the marketplace, even at the expense of market efficiencies and consumers. Early applications One of the earliest invocations of the Act was in 1894, against the American Railway Union led by Eugene V. Debs, with the intent to settle the Pullman Strike.J. Anthony Lukas, Big trouble : a murder in a small western town sets off a struggle for the soul of America (New York: Simon & Schuster, 1997), pp. 310f Several years would pass before the first use of the Act against its intended perpetratior, corporate monopolies. President Theodore Roosevelt used the Act extensively in his antitrust campaign, including to divide the Northern Securities Company. President William Howard Taft used the Act to split the American Tobacco Company. Legislative intent At Apex Hosiery Co. v. Leader 310 U. S. 469, 310 U. S. 492-93 and n. 15: ::The legislative history of the Sherman Act, as well as the decisions of this Court interpreting it, show that it was not aimed at policing interstate transportation or movement of goods and property. The legislative history and the voluminous literature which was generated in the course of the enactment and during fifty years of litigation of the Sherman Act give no hint that such was its purpose. Footnote 11 appears here: "See the Bibliography on Trusts (1913) prepared by the Library of Congress. Cf. Homan, Industrial Combination as Surveyed in Recent Literature, 44 Quart.J.Econ., 345 (1930). With few exceptions, the articles, scientific and popular, reflected the popular idea that the Act was aimed at the prevention of monopolistic practices and restraints upon trade injurious to purchasers and consumers of goods and services by preservation of business competition. See, e.g., Seager and Gulick, Trusts and Corporation Problems (1929), 367 et seq., 42 Ann.Am.Acad., Industrial Competition and Combination (July, 1912); P. L. Anderson, Combination v. Competition, 4 Edit.Rev. 500 (1911); Gilbert Holland Montague, Trust Regulation Today, 105 Atl.Monthly, 1 (1910); Federal Regulation of Industry, 32 Ann.Am.Acad. of Pol.Sci., No. 108 (1908), passim; Clark, Federal Trust Policy (1931), Ch. II, V; Homan, Trusts, 15 Ency.Soc.Sciences 111, 113: "clearly the law was inspired by the predatory competitive tactics of the great trusts, and its primary purpose was the maintenance of the competitive system in industry." See also Shulman, Labor and the Anti-Trust Laws, 34 Ill.L.Rev. 769; Boudin, the Sherman Law and Labor Disputes, 39 Col.L.Rev. 1283; 40 Col.L.Rev. 14."They do not suggest that, in general, state laws or law enforcement machinery were inadequate to prevent local obstructions or interferences with interstate transportation, or presented any problem requiring the interposition of federal authority.Footnote 12 appears here: "There was no lack of existing law to protect against evils ascribed to organized labor. Legislative and judicial action of both a criminal and civil nature already restrained concerted action by labor. See, e.g., the kinds of strikes which were declared illegal in Pennsylvania, including a strike accompanied by force or threat of harm to persons or property, Brightly's Purdon's Digest of 1885, pp. 426, 1172. For collection of state statutes on labor activities, see Report of the Commissioner of Labor, Labor Laws of the Various States (1892); Bull. 370, Labor Laws of the United States with Decisions Relating Thereto, United States Bureau of Labor Statistics (1925); Witte, The Government in Labor Disputes (1932), 12-45, 61-81." In 1890, when the Sherman Act was adopted, there were only a few federal statutes imposing penalties for obstructing or misusing interstate transportation.Footnote 13 appears here: "Three statutes covered in 1890 the Congressional action in relation to obstructions to interstate commerce. A penalty was imposed for the refusal to transmit a telegraph message (R.S. § 5269, 17 Stat. 366 (1872)) for transporting nitroglycerine and other explosives without proper safeguards (R.S. § 5353, 14 Stat. 81 (1866)) and for combining to prevent the continuous carriage of freight, 24 Stat. 382, 49 U.S.C. § 7." With an expanding commerce, many others have since been enacted safeguarding transportation in interstate commerce as the need was seen, including statutes declaring conspiracies to interfere or actual interference with interstate commerce by violence or threats of violence to be felonies.Footnote 14 appears here: "See, e.g. regulation of; interstate carriage of lottery tickets, 28 Stat. 963 (1895), 18 U.S.C. § 387; Transportation of obscene books, 29 Stat. 512 (1897), 18 U.S.C. § 396; transportation of illegally killed game, 31 Stat. 188 (1900), 18 U.S.C. §§ 392-395; interstate shipment of intoxicating liquors, 35 Stat. 1136 (1909), 18 U.S.C. §§ 388-390; white slave traffic, 36 Stat. 825 (1910), 18 U.S.C. §§ 397-404; transportation of prize-fight films, 37 Stat. 240 (1912), 18 U.S.C. §§ 405-407; larceny of goods moving in interstate commerce, 37 Stat. 670 (1913), 18 U.S.C. § 409; violent interference with foreign commerce, 40 Stat. 221 (1917), 18 U.S.C. § 381; transportation of stolen motor vehicles, 41 Stat. 324 (1919), 18 U.S.C. § 408; transportation of kidnapped persons, 47 Stat. 326 (1932), 18 U.S.C. § 408a-408c; threatening communication in interstate commerce, 48 Stat. 781 (1934), 18 U.S.C. § 408d; transportation of stolen or feloniously taken goods, securities or money, 48 Stat. 794 (1934), 18 U.S.C. § 415; transporting strikebreakers, 49 Stat. 1899 (1936), 18 U.S.C. § 407a; destruction or dumping of farm products received in interstate commerce, 44 Stat. 1355 (1927), 7 U.S.C. § 491. Cf. National Labor Relations Act, 49 Stat. 449 (1935), 29 U.S.C., Ch. 7, § 151, "Findings and declaration of policy. The denial by employers of the right of employees to organize and the refusal by employers to accept the procedure of collective bargaining lead to strikes and other forms of industrial strife or unrest, which have the intent or the necessary effect of burdening or obstructing commerce. . . ." The Anti-Racketeering Act, 48 Stat. 979, 18 U.S.C. §§ 420a-420e (1934), is designed to protect trade and commerce against interference by violence and threats. § 420a provides that "any person who, in connection with or in relation to any act in any way or in any degree affecting trade or commerce or any article or commodity moving or about to move in trade or commerce --" "(a) Obtains or attempts to obtain, by the use of or attempt to use or threat to use force, violence, or coercion, the payment of money or other valuable considerations . . . not including, however, the payment of wages by a bonafide employer to a bona fide employee; or" "(b) Obtains the property of another, with his consent, induced by wrongful use of force or fear, or under color of official right; or" "© Commits or threatens to commit an act of physical violence or physical injury to a person or property in furtherance of a plan or purpose to violate subsections (a) or (b); or" "(d) Conspires or acts concertedly with any other person or persons to commit any of the foregoing acts; shall, upon conviction thereof, be guilty of a felony and shall be punished by imprisonment from one to ten years or by a fine of $10,000 or both." But the application of the provisions of § 420a to labor unions is restricted by § 420d, which provides: "Jurisdiction of offenses. Any person charged with violating section 420a of this title may be prosecuted in any district in which any part of the offense has been committed by him or by his actual associates participating with him in the offense or by his fellow conspirators: Provided, That no court of the United States shall construe or apply any of the provisions of sections 420a to 420e of this title in such manner as to impair, diminish, or in any manner affect the rights of bona fide labor organizations in lawfully carrying out the legitimate objects thereof, as such rights are expressed in existing statutes of the United States." It is significant that Chapter 9 of the Criminal Code, dealing with "Offenses Against Foreign And Interstate Commerce" and relating specifically to acts of interstate transportation or its obstruction, makes no mention of the Sherman Act, which is made a part of the Code which deals with social, economic and commercial results of interstate activity, notwithstanding its criminal penalty." It was another and quite a different evil at which the Sherman Act was aimed. It was enacted in the era of "trusts" and of "combinations" of businesses and of capital organized and directed to control of the market by suppression of competition in the marketing of goods and services, the monopolistic tendency of which had become a matter of public concern. The end sought was the prevention of restraints to free competition in business and commercial transactions which tended to restrict production, raise prices, or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which had come to be regarded as a special form of public injury. Footnote 15 appears here: "The history of the Sherman Act, as contained in the legislative proceedings, is emphatic in its support for the conclusion that "business competition" was the problem considered, and that the act was designed to prevent restraints of trade which had a significant effect on such competition. On July 10, 1888, the Senate adopted without discussion a resolution offered by Senator Sherman which directed the Committee on Finance to inquire into, and report in connection with, revenue bills "such measures as it may deem expedient to set aside, control, restrain or prohibit all arrangements, contracts, agreements, trusts, or combinations between persons or corporations, made with a view, or which tend to prevent free and full competition . . . with such penalties and provisions . . . as will tend to preserve freedom of trade and production, the natural competition of increasing production, the lowering of prices by such competition . . ." (19 Cong.Rec. 6041). This resolution explicitly presented the economic theory of the proponents of such legislation. The various bills introduced between 1888 and 1890 follow the theory of this resolution. Many bills sought to make void all arrangements "made with a view, or which tend, to prevent full and free competition in the production, manufacture, or sale of articles of domestic growth or production, . . ." S. 3445; S. 3510; H.R. 11339; all of the 50th Cong., 1st Sess. (1888) were bills of this type. In the 51st Cong. (1889), the bills were in a similar vein. See S. 1, sec. 1 (this bill as redrafted by the Judiciary Committee ultimately became the Sherman Law); H.R. 202, sec. 3; H.R. 270; H.R. 286; H.R. 402; H.R. 509; H.R. 826; H.R. 3819. See Bills and Debates in Congress relating to Trusts (1909), Vol. 1, pp. 1025-1031. Only one, which was never enacted, S. 1268 in the 52d Cong., 1st Sess. (1892), introduced by Senator Peffer, sought to prohibit "every willful act . . . which shall have the effect to in any way interfere with the freedom of transit of articles in interstate commerce, . . ." When the antitrust bill (S. 1, 51st Cong., 1st Sess.) came before Congress for debate, the debates point to a similar purpose. Senator Sherman asserted the bill prevented only "business combinations" "made with a view to prevent competition", 21 Cong.Rec. 2457, 2562; see also ibid. at 2459, 2461. Senator Allison spoke of combinations which "control prices," ibid., 2471; Senator Pugh of combinations "to limit production" for "the purpose of destroying competition", ibid., 2558; Senator Morgan of combinations "that affect the price of commodities," ibid., 2609; Senator Platt, a critic of the bill, said this bill proceeds on the assumption that "competition is beneficent to the country," ibid., 2729; Senator George denounced trusts which crush out competition, "and that is the great evil at which all this legislation ought to be directed," ibid., 3147. In the House, Representative Culberson, who was in charge of the bill, interpreted the bill to prohibit various arrangements which tend to drive out competition, ibid., 4089; Representative Wilson spoke in favor of the bill against combinations among "competing producers to control the supply of their product, in order that they may dictate the terms on which they shall sell in the market, and may secure release from the stress of competition among themselves," ibid., 4090. The unanimity with which foes and supporters of the bill spoke of its aims as the protection of free competition permits use of the debates in interpreting the purpose of the act. See White, C.J. in Standard Oil Co. v. United States, 221 U. S. 1, 221 U. S. 50; United States v. San Francisco, ante, p. 310 U. S. 16. See also Report of Committee on Interstate Commerce on Control of Corporations Engaged in Interstate Commerce, S.Rept. 1326, 62d Cong., 3d Sess. (1913), pp. 2, 4; Report of Federal Trade Commission, S.Doc. 226, 70th Cong., 2d Sess. (1929), pp. 343-345." For that reason the phrase "restraint of trade," which, as will presently appear, had a well understood meaning at common law, was made the means of defining the activities prohibited. The addition of the words "or commerce among the several States" was not an additional kind of restraint to be prohibited by the Sherman Act, but was the means used to relate the prohibited restraint of trade to interstate commerce for constitutional purposes, Atlantic Cleaners & Dyers v. United States, 286 U. S. 427, 286 U. S. 434, so that Congress, through its commerce power, might suppress and penalize restraints on the competitive system which involved or affected interstate commerce. Because many forms of restraint upon commercial competition extended across state lines so as to make regulation by state action difficult or impossible, Congress enacted the Sherman Act, 21 Cong.Rec. 2456. It was in this sense of preventing restraints on commercial competition that Congress exercised "all the power it possessed." Atlantic Cleaners & Dyers v. United States, supra, 286 U. S. 435. At United States v. Addyston Pipe & Steel Co.,'' 85 F.2d 1, affirmed, 175 U. S. 175 U.S. 211; At Standard Oil Co. of New Jersey v. United States 221 U. S. 1, 221 U. S. 54-58. Provisions Original text The Sherman Act is divided into three sections. Section 1 delineates and prohibits specific means of anticompetitive conduct, while Section 2 deals with end results that are anticompetitive in nature. Thus, these sections supplement each other in an effort to prevent businesses from violating the spirit of the Act, while technically remaining within the letter of the law. Section 3 simply extends the provisions of Section 1 to U.S. territories and the District of Columbia. :Section 1: ::"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal."See . :Section 2: ::"Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony . . "See . Subsequent legislation expanding its scope The Clayton Antitrust Act, passed in 1914, proscribes certain additional activities that had been discovered to fall outside the scope of the Sherman Antitrust Act. For example, the Clayton Act added certain practices to the list of impermissible activities: *price discrimination between different purchasers, if such discrimination tends to create a monopoly *exclusive dealing agreements *tying arrangements *mergers and acquisitions that substantially reduce market competition. The Robinson-Patman Act of 1936 amended the Clayton Act. The amendment proscribed certain anticompetitive practices in which manufacturers engaged in price discrimination against equally-situated distributors. Legal Application Constitutional basis for legislation Congress derived its power to pass the Sherman Act through its constitutional authority to regulate interstate commerce. Therefore, Federal courts only have jurisdiction to apply the Act to conduct that restrains or substantially affects either interstate commerce or trade within the District of Columbia. This requires the plaintiff must show that the conduct occurred during the flow of interstate commerce or had an appreciable effect on some activity that occurs during interstate commerce. Elements A Section 1 violation has three elements:E.g., Richter Concrete Corp. v. Hilltop Basic Resources, Inc., 547 F. Supp. 893, 917 (S.D. Ohio 1981), aff'd, 691 F.2d 818 (6th Cir. 1982); Consolidated Farmers Mut. Ins. Co. v. Anchor Sav. Ass'n, 480 F. Supp. 640, 648 (D. Kan. 1979); Mardirosian v. American Inst. of Architects, 474 F. Supp. 628, 636 (D.D.C. 1979). #An agreement #which unreasonably restrains competition #and which affects interstate commerce. A Section 2 violation has 2 elements:United States v. Grinnell Corp., 384 U.S. 563, 570-71, 16 L. Ed. 2d 778, 86 S. Ct. 1698 (1966); see also Weiss v. York Hosp., 745 F.2d 786, 825 (3d Cir. 1984). :(1) the possession of monopoly power in the relevant market and :(2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. Violations "Per se" and violations of the "Rule of Reason" Violations of the Sherman Act fall (looselyThe truth is that our categories of analysis of anticompetitive effect are less fixed than terms like 'per se,' 'quick look,' and 'rule of reason' tend to make them appear. We have recognized, for example, that 'there is often no bright line separating per se from rule of reason analysis,' since 'considerable inquiry into market conditions' may be required before the application of any so-called 'per se' condemnation is justified. Cal. Dental Ass'n v. FTC at 779 (quoting NCAA, 468 U.S. at 104 n.26). "'Whether the ultimate finding is the product of a presumption or actual market analysis, the essential inquiry remains the same whether or not the challenged restraint enhances competition.'" 526 U.S. at 779-80 (quoting NCAA, 468 U.S. at 104).) into two categories: *'''Violations "per se": these are violations that meet the strict characterization of Section 1 ("agreements, conspiracies or trusts in restraint of trade"). A per se violation requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice. Conduct characterized as per se unlawful is that which has been found to have a "'pernicious effect on competition' or 'lacks . . . any redeeming virtue'"Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 58 (1977) (quoting Northern Pac. Ry. v. United States, 356 U.S. 1, 5 (1958)). Such conduct "would always or almost always tend to restrict competition and decrease output."Broadcast Music, Inc. v. CBS, 441 U.S. 1, 19-20 (1979). When a per se rule is applied, a civil violation of the antitrust laws is found merely by proving that the conduct occurred and that it fell within a per se category. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 104 S. Ct. 1551, 1556 (1984); Gough v. Rossmoor Corp., 585 F.2d 381, 386-89 (9th Cir. 1978), cert. denied, 440 U.S. 936 (1979); see White Motor v. United States, 372 U.S. 253, 259-60 (1963) (a per se rule forecloses analysis of the purpose or market effect of a restraint); Northern Pac. Ry. v. United States, 356 U.S. 1, 5 (1958) (same). (This must be contrasted with rule of reason analysis.) Conduct considered per se unlawful includes horizontal price-fixing,United States v. Trenton Potteries Co., 273 U.S. 392, 397-98 (1927) horizontal market division,T.V., Inc. v. G.T.E. Sylvania Inc.97 S.Ct. 2549(1977) limiting[United States v. Topco Assocs.405 U.S. 596, 608 (1972); by making vertical market division rule-of-reason analysis and vertical minimum resale-price-fixing or price maintenance see: State Oil Co. v. Khan, 522 U.S. 3 (1997) limitingCalifornia Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97, 102-03 (1980). *'Violations of the "rule of reason":' A totality of the circumstances test, asking whether the challenged practice promotes or suppresses market competition. Unlike with per se violations, intent and motive are relevant when predicting future consequences. The rule of reason is said to be the "traditional framework of analysis" to determine if Section 1 is violated.Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977). The inquiry focuses on the restraint's effect on competition. National Soc'y of Professional Eng'rs v. United States, 435 U.S. 679, 691 (1978). The court analyzes "facts peculiar to the business, the history of the restraining, and the reasons why it was imposed,"id. at 692 to determine the effect on competition in the relevant product market.see Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 45 (1977) (citing United States v. Arnold, Schwinn & Co., 388 U.S. 365, 382 (1967)), and geographic market, see United States v. Columbia Steel Co., 334 U.S. 495, 519 (1948). A restraint violates Section 1 if it unreasonably restrains trade.Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977); see Standard Oil Co. v. United States, 221 U.S. 1, 58 (1911) (Congress only intended to prohibit agreements that were "unresonably restrictive of competitive (conditions"). ::Quick-look: A "quick look" analysis under the rule of reason may be used when "an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets," yet the violation is also not one considered illegal per se.Cal. Dental Ass'n, 526 U.S. at 770. Taking a "quick look," economic harm is presumed from the questionable nature of the conduct, and the burden is shifted to the defendant to prove harmlessness or justification. The quick-look became a popular way of disposing of cases where the conduct was in a grey area between illegality "per se" and demonstrable harmfulness under the "rule of reason". Modern Trends Inference of Conspiracy Two modern trends have increased the difficulty for antitrust plaintiffs. First, courts have come to hold plaintiffs to increasing burdens of pleading. Under older Section 1 precedent, it was not settled how much evidence was required of the conspiracy. It could be inferred. Since the 1970s, courts have held plaintiffs to higher standards, giving antitrust defendants an opportunity to resolve cases in their favor, before much, if any discovery is done. This protects defendants from bearing the costs of antitrust "fishing expeditions"; however, it deprives plaintiffs of perhaps their only tool to acquire evidence. Manipulating Market Definitions Second, courts have employed more sophisticated and principled definitions of markets. Market definition is necessary in rule of reason cases, for the plaintiff to prove a conspiracy is harmful. It is also necessary for the plaintiff to establish the market relationship between conspirators to prove their conduct is within the per se rule. In early cases, it was easier for plaintiffs to show market relationship, or dominance, by tailoring market definition, even if it ignored fundamental principles of economics. In U.S. v. Grinnell, 384 U.S. 563 (1966), the trial judge, Charles Wyzanski composed the market only of alarm companies with services in every state, tailoring out any local competitors; the defendant stood alone in this market, but had the court added up the entire national market, it would have had a much smaller share of the national market for alarm services that the court purportedly used. The appellate courts affirmed this finding; however, today, an appellate court would likely find this definition to be flawed. Modern courts use a more sophisticated market definition that does not permit as manipulative a definition. Monopoly Section 2 of the act forbade monopoly. In section 2 cases, the court has, again on its own initiative, drawn a distinction between coercive and innocent monopoly. The act is not meant to punish businesses that come to dominate their market passively or on their own merit, only those that intentionally dominate the market through misconduct, which generally consists of conspiratorial conduct of the kind forbidden by section 1 of the Sherman Act, or Section 3 of the Clayton Act. Application of the act outside of pure commerce The Act was aimed at regulating businesses. However, its application was not limited to the commerce side of business. Its prohibition of the cartel was also interpreted to make illegal many labor union activities. This is because unions were characterized as cartels as well (cartels of laborers). This persisted until 1914, when the Clayton Act created exceptions for certain union activities. Preemption by Section 1 of state statutes that restrain competition To determine whether a particular state statute that restrains competition was intended to be preempted by the Act, courts will engage in a two-step analysis, as set forth by the Supreme Court in Rice v. Norman Williams Co.. *First, they will inquire whether the state legislation "mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or ... places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute." Rice v. Norman Williams Co., 458 U.S. 654, 661; see also 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) ("Our decisions reflect the principle that the federal antitrust laws pre-empt state laws authorizing or compelling private parties to engage in anticompetitive behavior.") *Second, they will consider whether the state statute is saved from preemption by the state action immunity doctrine (aka Parker immunity). In California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980), the Supreme Court established a two-part test for applying the doctrine: "First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy; second, the policy must be actively supervised by the State itself." Id. (citation and quotation marks omitted). Criticism The Sherman act has been a magnet for controversy. One branch of the criticism focuses on whether the Act improves competition and benefits consumers, or merely aids inefficient businesses at the expense of more innovative ones. Alan Greenspan, in his essay entitled Antitrust''http://www.polyconomics.com/searchbase/06-12-98.html condemns the Sherman Act as stifling innovation and harming society. "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible." ''Id''It should be noted that criticisms such as this one, attributed to Greenspan, are not directed at the Sherman act in particular, but rather at the underlying policy of all antitrust law, which includes several pieces of legislation other than just the Sherman Act, e.g. the Clayton Antitrust Act. Another aspect of the debate over antitrust policy is normative. That is, assuming that some kind of competition law is inevitable, critics will argue as to what its central policy should be, and whether it is accomplishing its goal. A common tactic is to choose a goal, and then cite evidence that it supports the opposite. For example, during a debate over the act in 1890, Representative William Mason said "trusts have made products cheaper, have reduced prices; but if the price of oil, for instance, were reduced to one cent a barrel, it would not right the wrong done to people of this country by the trusts which have destroyed legitimate competition and driven honest men from legitimate business enterprise."Congressional Record, 51st Congress, 1st session, House, June 20, 1890, p. 4100. Consequently, if the primary goal of the act is to protect consumers, and consumers are protected by lower prices, the act may be harmful if it reduces economy of scale, a price-lowering mechanism, by breaking up big businesses. The converse argument is that if lowering prices alone is not the goal, and instead protecting competitions and markets as well as consumers is the goal, the law again arguably has the opposite effect — it could be protectionist. Economist Thomas DiLorenzo notes that Senator Sherman sponsored the 1890 William McKinley tariff just three months after the Sherman Act, and agrees with ''The New York Times which wrote on October 1, 1890: "That so-called Anti-Trust law was passed to deceive the people and to clear the way for the enactment of this Pro-Trust law relating to the tariff." The Times goes on to assert that Sherman merely supported this "humbug" of a law "in order that party organs might say...'Behold! We have attacked the trusts. The Republican Party is the enemy of all such rings.' " Dilorenzo writes: "Protectionists did not want prices paid by consumers to fall. But they also understood that to gain political support for high tariffs they would have to assure the public that industries would not combine to increase prices to politically prohibitive levels. Support for both an antitrust law and tariff hikes would maintain high prices while avoiding the more obvious bilking of consumers."DiLorenzo, Thomas, Cato Handbook for Congress, Antitrust. The criticism of antitrust law is often associated with conservative politics. For example, conservative legal scholar, judge, and failed Supreme Court nominee Robert Bork is well known for his outspoken criticism of the antitrust regime. Another conservative legal scholar and judge, Richard Posner of the Seventh Circuit does not condemn the entire regime, but expresses concern with the potential that it could be applied to create inefficiency, rather than to avoid inefficiency.Richard Posner, _Economic Analysis of Law_ p.295 et seq. (explaining the optimal antitrust regime from an econimc point of view). Posner further believes, along with a number of others, including Bork, that genuinely inefficient cartels and coercive monopolies, the target of the act, would be self-corrected by market forces, making the strict penalties of antitrust legislation unnecessary. Id. See also *Alcoa *American Bar Association *American Tobacco Company *AT&T *Microsoft *Northern Securities Company *Ticketmaster *Standard Oil *Standard Oil Co. of New Jersey v. United States *Tying (commerce) *Antitrust *Cartel *Clayton Antitrust Act of 1914 *DRAM price fixing *Monopoly *Price fixing *Resale price maintenance *National Linseed Oil Trust *laissez faire Notes External links Official websites *U.S. Department of Justice: Antitrust Division *U.S. Department of Justice: Antitrust Division - text of SHERMAN ANTITRUST ACT, 15 U.S.C. §§ 1-7 Additional information *Antitrust Division's "Corporate Leniency Policy" *[http://www.polyconomics.com/searchbase/06-12-98.html Antitrust] by Alan Greenspan *Dr. Edward W. Younkins (February 19, 2000). "Antitrust Laws Should Be Abolished". *DiLorenzo, Thomas [http://www.cato.org/pubs/handbook/hb105-39.html Cato Handbook for Congress, Antitrust]. *[http://videoproject.com/fai-980-d.html Fair Fight in the Marketplace] Documentary on anti-trust law hosted by NPR/Fox commentator Mara Liasson. Category:United States federal antitrust legislation Category:History of the petroleum industry Category:1890 in law Category:History of the United States (1865–1918) Category:Monopoly (economics) Category:1890 in the United States ca:Llei Sherman Antitrust dels Estats Units d'Amèrica de:Sherman Antitrust Act es:Ley Sherman Antitrust de los Estados Unidos de América fr:Sherman Antitrust Act it:Sherman Antitrust Act ja:シャーマン法 pl:Ustawa Shermana ru:Акт Шермана